Remark Holdings Inc (MARK) 2021 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Remark Holdings fiscal year 2021 financial results conference call. My name is Kyle. I will be the operator for today and will handle the Q&A. As a reminder, this conference is being recorded.

Now I'd like to turn the call over to Brian Harvey. Please go ahead, sir.

Thank you, Kyle. Good afternoon and welcome to Remark Holdings' fiscal year 2021 financial results conference call. I'm Brian Harvey, Senior Vice President of Capital Markets and Investor Relations for Remark. On the call with me this afternoon is Kai-Shing Tao, Remark's Chairman and Chief Executive Officer. In just a moment, Mr. Tao will provide an update on our business, and I will recap our fiscal year financial results. Following those remarks, we will open the call to questions.

But before I turn the call over to Mr. Tao, I would like to take this opportunity to remind you that some of the statements made today may be forward-looking statements. These statements involve risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. Any forward-looking statements reflect Remark Holdings' current views, and Remark Holdings expressly disclaims any obligation to update or revise any forward-looking statements after the date hereof. This disclaimer is only a summary of Remark Holdings' statutory forward-looking statements disclaimer, which is included in full in its filings with the SEC.

I would now like to turn the call over to Remark's Chairman and Chief Executive Officer, Mr. Tao, so he can provide additional color on Remark's business and recent developments. Shing?

Thank you, Brian. Fourth quarter 2021 was another transformative quarter for us in many different ways. First, we were able to make significant progress for the upcoming launch of our metaverse and NFT platform. Second, despite the zero-COVID policy in China, we are not just catching up on the business that -- businesses that have reopened, but have now expanded deeper into each industry we are currently involved in and expand horizontally into new ones. Number three, off the success of winning our business with Brightline by building their AI security platform, we have not only expanded our efforts into new states and major cities selling the same security platform, but also into the United Kingdom and more specifically, into London.

In the fourth quarter, we began putting together a deal to bring the world's most popular music group to Las Vegas and to partner with them in one of the world's largest hospitality conglomerates. The deal was consummated in February of 2022, and our take was to have the rights to build the metaverse and not -- in all the experiences surrounding the event. The response to this event has been overwhelmingly successful any way you look at it and has presented itself to be a great launch point for our Remark AI metaverse called VegasVerz. As we are the first company in the world that truly provides both online and off-line in the integrated experience and not just talked about, we are very excited for what lies ahead.

To go further into detail on what exactly VegasVerz is, it helps -- VegasVerz helps connect the off-line and online world as we know it and creates a seamless experience for the 2 to build engagement. And in particular for VegasVerz, fans that will be attending the concerts or other live events in the future will be given incentives to engage the physical properties through augmented reality games. The players then obtain NFT coupons, which can link together then with off-line businesses, unlocking special coupons for special prices, discounts and more.

The VegasVerz game check-in uses both augmented reality landmark recognition in a variety of game methods to bridge the gap between the metaverse and the real world. This will allow the fan to track all the important and popular events that matters to you and being able to participate in their favorite stars' metaverse stories and be their biggest fan by supporting them in the metaverse. They will be able to obtain and collect rare NFTs of the stars that they love and even share it on their favorite social platforms and finally, also be able to jump into the stars' world by becoming an important figure in their life and in one of our many game play story lines.

VegasVerz puts the power into fans' hands, and we believe this will be the ultimate technological experience for only the biggest fans. We welcome our investors to enter VegasVerz on April 4, this upcoming Monday, and welcome to the future of fandom. This once-in-a-lifetime opportunity, to build with one of the world's largest hospitality conglomerates and one of the world's most popular music companies, was made possible by the foundation we have built over the last 5 years with our AI platform.

This foundation will continue to keep -- will continue to drive benefits as we will continue to expand this metaverse opportunity to other live events and global celebrities. Already because of what we have done, we are building the metaverse lifestyle shopping opportunity for one of the world's most popular movie stars and one of the world's most popular sports stars.

Despite a very strict zero-COVID policy in China, we were able to resume our business in the fourth quarter with additional deployments and additional wins. The strength is growing very well into the first quarter. And while it's not without its difficulties, we are able to adapt and continue to deploy while winning new businesses. We continue to build and grow our businesses in industries and customers that you have heard in the past. These industries include smart campus with schools, smart communities and construction companies. The growth in these industries continue to be strong. And while timing continues to be tricky due to the zero-COVID policy, we are adapting and moving fast.

In addition, we have now expanded our Remark ad platform into new verticals. One is creating the first aviation, AI-focused platform for one of the world's largest airline companies. This is exciting, as you can imagine, because based upon the success of our launch, we can market this to other airline companies, especially because the AI platform focuses on safety and power efficiency.

For example, our Remark AI aviation platform will be the foundation that all AI applications will be built off of in the future. These will include engine maintenance; fire and smoke detection; autonomous driving, as it relates to passenger cars and baggage vehicles; and bird and drone detection.

Other areas of expansion include in the areas of retailing, most specifically in food retail. We commenced a POC, or proof of concept, with 30 stores to improve service quality, kitchen cleanliness, food processing safety in customer experiences. The next step after this 30-store POC is to expand into the first phase of 1,500 stores. The strategy is working well as we are seeing a lot of progress of taking these live tests and real concepts in China and bring into the U.S. Having these successes in a multiple of industries have allowed us to take these proven platform to other parts of the world.

We have been able to make significant headway into the U.S. Our first success is winning the AI security partnership with Brightline, the high-speed train going from Miami up to Orlando. With that, we have now increased our efforts to major cities like New York City and Chicago and states like Texas, Nevada, California, Florida and New Jersey. A big part of this increased effort is due to the demand we are seeing from both government and private business post infrastructure bill. The $1.7 trillion infrastructure bill that passed is a once-in-a-lifetime opportunity. Many of the RFPs and RFIs are in areas where we possess significant expertise, know-how and real-life experience. This has to do with -- in the areas of intrusion detection and fire and smoke detection, smart city and smart traffic.

We will continue to update you on our progress over the next quarter, and we are very excited about the things to come. We will update you as we are close to very promising milestones that we'll be hitting over the course -- over the year. Brian?

Thank you, Shing. I'll just go over a few of the highlights from the financials. Fiscal year '21 revenue grew 58% to $16 million from $10.1 million in fiscal year '20. Revenue from China grew by $4.3 million during 2021 to $12.2 million primarily due to large increases in revenue generated from AI projects in schools and certain construction projects. U.S. revenue increased by $1.5 million in fiscal 2021 to $3.8 million primarily from the completion of an AI data intelligence project. Our gross profit improved to $4.5 million from $3.7 million in fiscal 2020, commensurate with the increase in revenue.

We incurred an operating loss of $13.9 million in fiscal 2021 compared to an operating loss of $14.2 million in fiscal 2020. The primary drivers of the improvement were lower sales and marketing expenses as start-up costs associated with the biosafety business did not repeat. However, technology and development expenses increased in conjunction with new product development for the Smart Sentry product that is expected to be utilized by railway customers.

G&A increases were driven by $3.5 million of share-based compensation. Remark reported net income of $27.5 million or $0.27 per basic and diluted share in fiscal 2021, which compared favorably to a net loss of $13.7 million or $0.16 per basic and diluted share in fiscal 2020. The increase primarily resulted from the revaluation of the company's investment in Sharecare.

At December 31, 2021, our cash balance totaled $14.2 million compared to a cash balance of $900,000 at December 31, 2020. Proceeds from debt issuances, stock issuances, stock option exercises and $2.3 million in proceeds from the Sharecare transaction were offset by cash used in operations and the repayment of certain debt.

With that, I will turn the call back to the operator, and we will now open the conference call to questions. (Operator Instructions). Kyle, could you please instruct the callers how to queue up with their questions?

Certainly, Brian. (Operator Instructions) We take our first question from [Reed] with [NRS.]

Shing, Brian, I was wondering if you could answer a couple of questions with the revenue breakout for Brightline. I'm just looking through the release that you had. And I'm not sure if I missed it, but I don't necessarily see a breakout of what the revenue is that's going to be realized for Brightline and how that partnership is.

And then also, I'm just going back to my notes from some previous calls that we've had, and I was wondering if there's any update on that last construction project that had been highlighted in some of the previous quarters. I do note a mention that in the press release, and I was wondering if that's still active or if there's any new development there.

Shing, you want...

Yes, I'll answer that. Yes, I'll answer that. As far as it goes with the construction, I'm not sure which one you were referring to. But just in general, with the construction, we started the deployment of our safety and security platform for the construction sites, which covers the workers' check-in and checkout system, worker TV monitoring system, the smart helmets, falling prevention system. So by the end of 2021, we have successfully completed 32 construction projects. And over the course of the next 6 months, we expect another 37 to be completed. I'm not sure if that was the one that you're referring to.

And as it relates to Brightline, I think we have -- the latest progress is that we're still working on the full-scale deployment. Right now, originally, the plan was to go from Miami to Palm Beach. And because they now are almost done on finishing their expansion from Palm Beach to Orlando, we're trying to finalize the total scope of handling the entire track and doing it all at once.

Okay. That is helpful. The construction collaboration, I think, it was from third quarter last year, it was like around like $5 million of revs, but I can't find my notes that has all the details. So I can always follow up with Brian afterwards.

Sure. Yes.

(Operator Instructions) It appears there are no further question at this time. I'd like to turn the conference back to you, Brian, for any additional closing remarks.

Great. Thank you, and thank you all for participating in Remark Holdings' fiscal year 2021 financial results conference call. A replay will be available in approximately 4 hours through the same link issued in our March 22 press release. Thank you. Have a good afternoon.

This concludes today's conference. Thank you for your participation. You may now disconnect.